COVER STORY Korean investors in Nvidia suffer estimated $2.4 bil. in valuation losses

A deepening scandal involving Nvidia CEO Jensen Huang is unnerving Korean investors, as the chip giant's shares are falling and uncertainty mounts over his future.

Nvidia is the second-most-held U.S. stock among Korean investors after Tesla, leaving local shareholders exposed to mounting losses as the chipmaker's shares plunged amid the scandal.

Korean investors held about $13.65 billion worth of Nvidia shares as of Thursday, according to data from the Korea Securities Depository. An estimated 800,000 retail investors in Korea own shares in the chipmaker.

Nvidia shares have fallen nearly 15 percent since the company announced an investigation into these allegations.

Assuming the retail investors maintained their holdings, the 15 percent decline in shares would amount to an estimated $2.4 billion in valuation losses.

The losses extend beyond direct shareholdings. Some 153 exchange-traded funds (ETFs) listed on the Korea Exchange have exposure to Nvidia.

The ACE Nvidia Bond Mixed ETF, with assets of about 197.9 billion won ($148 million), has roughly 30 percent of its portfolio invested in Nvidia. The TIGER US AI Semiconductor Fabless ETF and KODEX US AI Semiconductor Top 3 Plus ETF have exposures of 28 percent and 26.3 percent, respectively.

Nvidia shares additionally fell more than 8 percent in after-hours trading Wednesday (local time) following a Wall Street Journal report that the company's board was preparing to remove Huang.

The report followed another one by the New York Times earlier in the day that Huang had an extramarital affair with Kimberly Powell, Nvidia's vice president of health care.

The reports came just days after Huang's acknowledgment of the affair, in response to separate allegations involving Alice Huang, a businesswoman suspected by U.S. intelligence officials of having links to Chinese intelligence.

The company's market capitalization stood at about $3.83 trillion in after-hours trading Wednesday, down roughly $361 billion in a single day. The decline pushed the chipmaker to third place among the world's most valuable companies, behind Apple and Microsoft.

The broad sell-off has dealt a blow to Korean investors.

"I'm devastated. I've been buying Nvidia shares since the beginning of the year and now hold 130 shares. Nvidia makes up 70 percent of my portfolio, and I've already been struggling with losses from the exchange rate," one user wrote on an online community for U.S. stock investors.

"I never expected Nvidia to be hit by a scandal involving its CEO. What worries me more is that the controversy surrounding Jensen Huang could spill over into other memory chip and semiconductor stocks," another investor wrote.

Part of the strong reaction in Korea may stem from Huang's high profile in the country. His visits have made headlines, drawing widespread attention for informal gatherings with some of Korea's biggest business leaders and public appearances. He last visited Korea in June.

Beyond retail investors, the National Pension Service may have also seen a substantial decline in the value of its Nvidia holdings. The public pension fund held about 50.8 million shares as of June 30, worth approximately $10.17 billion at the time, according to its filing with the U.S. Securities and Exchange Commission.

Market watchers expect the ongoing uncertainty over Huang's fate to keep Nvidia shares volatile.

"The market will be watching whether Huang is actually removed, whether he would retain influence through the board or other channels if he steps down, and whether a new management team would maintain Nvidia's existing artificial intelligence (AI) investment strategy," said Seo Sang-young, an analyst at Mirae Asset Securities.

The company's earnings report due next week could add to the volatility, Seo said.

Amid these developments, attention is turning to whether Korean retail investors will pursue legal action against Nvidia over their losses.

A shareholder class action has already been filed in the United States, accusing Nvidia and Huang of misleading investors by failing to disclose information about Huang's alleged ties to Alice Huang and potential risks to the company. The lawsuit was filed in a federal court in California last week.

Some legal experts say joining the U.S. class action could be a more practical option for Korean investors than pursuing separate claims in Korean courts, given potential jurisdictional hurdles and procedural complexities.